Site Mobile Navigation

Obama to Nominate Two for Vacancies on Fed Board

WASHINGTON — President Obama said Tuesday that he would nominate Jeremy C. Stein, a Harvard economist, and Jerome H. Powell, a former private equity executive, to fill the two vacant seats on the Federal Reserve’s board.

The pairing of Professor Stein, a Democrat, and Mr. Powell, a Republican, is a carefully weighted gesture, a pragmatic attempt to satisfy Senate Republicans who have repeatedly refused to allow votes on nominees for regulatory positions.

Not since 1988 has a president sought to add a member of the opposition party to the Fed’s board, but the White House judged that its decision was the only practical alternative to leaving the positions unfilled for at least another year.

In announcing his choices, Mr. Obama lauded both men for “impressive knowledge of economic and monetary policy,” and described them as “tremendously qualified.”

The office of Senator Tim Johnson, the South Dakota Democrat and chairman of the Banking Committee, said he would try to schedule a hearing as soon as the Senate returned from its winter vacation in late January. “With the fragile state of U.S. economy and a looming European debt crisis, Chairman Johnson believes it is imperative that our financial regulators operate at full strength,” the statement from his office said.

Photo

Jeremy C. Stein is a professor of economics at Harvard.Credit
Harvard

The office of the ranking Republican on the committee, Senator Richard Shelby of Alabama, did not respond to a request for comment. Mr. Shelby was briefed on the selections, but has not committed to supporting the choices, according to a person familiar with the matter who spoke on condition of anonymity.

Professor Stein and Mr. Powell both are experts in the workings of financial markets, an important specialty as the Fed expands its regulatory responsibilities. The five current members of the board are primarily experts in other areas.

Professor Stein, 51, joined the Harvard faculty in 2000 after a decade at the Massachusetts Institute of Technology, where he earned a doctorate in 1983. His experience is largely as a student of policy, although he worked for five months in early 2009 as an adviser to the Obama administration and the Treasury Department. He also served briefly on the staff of the Council of Economic Advisers in 1989 and 1990 under President George H. W. Bush.

His work has generally placed him in opposition to the view that prevailed at the Fed under its former chairman, Alan Greenspan, who argued that markets were largely self-regulating and that the government tended to do more harm than good.

He has advocated for stricter regulation of financial companies, including higher capital requirements for large financial institutions, which would constrain their ability to finance operations with borrowed money. He has rejected the argument made by banks that such an increase would reduce lending, describing the cost in one article as “too small to have a big impact on growth.”

He also has argued for strengthened federal regulation of “shadow banks” like private equity funds and mutual funds that function like banks but are not subject to the same rules or oversight. “Commercial banks and shadow banks should be regulated in a symmetric fashion,” he wrote in a 2010 paper.

Photo

Jerome H. Powell is a former Treasury under secretary.Credit
C-Span

Mr. Powell, 58, a visiting scholar at the Bipartisan Policy Center, worked for nearly a decade as a partner at the Carlyle Group, a private equity firm. He also served as Treasury under secretary for finance under President George H. W. Bush.

He would effectively serve as a replacement on the board for Kevin Warsh, the last governor with substantial experience working in the financial markets, who resigned this year. The Fed cultivates close ties with Wall Street firms to improve its understanding of the financial and economic issues.

Mr. Powell described himself in a recent interview with Bloomberg Television as, “by any fair reckoning a fiscal conservative,” but he is known for taking independent positions on policy issues. He argued publicly earlier this year that the debt ceiling should be raised, warning Republicans against failing to do so.

Even if confirmed, the men are not expected to change the course of the Fed’s monetary policy, according to independent analysts. Neither man has expressed strong views about the Fed’s efforts to improve the economy. Moreover, members of the board of governors rarely break ranks with the Fed’s chairman.

Macroeconomic Advisers, a forecasting firm that follows the Fed closely, said in a note to clients that the men would bring valuable expertise to the table, but that the Fed’s chairman, Ben S. Bernanke, would continue to determine how far the central bank intended to push its efforts to spur economic growth.